to provide a return on the investment to both the franchisor and the franchisee. So you will need to keep costs low and prices as high as the market will bear. One advantage of a franchise operation is that supplies can be bought in bulk across the whole franchise, which will help to keep costs down. But you can see that franchising would be unsuitable in a market where the margin between cost and income is very narrow.
CD1 Track 23 Ex 3.6
Listen to Part 2, Section 3 again and answer the following questions.
Section 3
The franchisor will need to provide support and training to the franchisee because, in addition to the brand, what you are selling is a way of doing business that has proved successful. You will need to produce an operating manual that describes in detail all the different systems and procedures involved in the business, and the performance and quality standards, but you will also have to provide some kind of training for the franchisees and possibly his employees, certainly in setting up the operation and possibly on a regular, ongoing basis. The important point here is that for a franchise to be successful, it should be possible for the franchisee to develop the skills required to operate the business fairly quickly. So, although some initial training may be required, the franchisee should be able to operate the business efficiently and successfully within a few months of start-up. In some types of franchise, the skills required may be acquired quickly; in others, the franchisee may have already developed most of the necessary skills in previous employment. So, for example, someone operating a franchise in the restaurant industry is likely to have experience either as an employee in a restaurant, or in a similar field.
CD1 Track 24 Ex 4.1
Listen to Part 3 of the lecture. Make notes on the key points in your notebook.
Part 3 Section 1
One further issue you may need to consider is whether the business is transferable to another geographical area. If you have developed your business serving one particular part of the country and you want to set up a franchise
80 English for Academic Study
network covering a much larger area – the whole country, for example – another thing you will have to consider is whether there is a similar market for your product or service in different regions. It may be, for example, that competition in other parts of the country may be so strong that it is difficult for franchisees to survive, or that for localized socioeconomic or cultural reasons the business may not be as profitable.
Section 2
Finally, when you are setting up a franchise network, you will need to bear in mind that you will be losing direct control of the way your brand is perceived by the customer, so this brings me to my last point, which is to emphasize the importance of protecting your brand. I am sure you are all aware that it often takes a long time to establish a distinctive brand with a valuable reputation, but that this reputation can be damaged comparatively quickly if, for example, quality standards are not consistently applied. The detailed operating manual, that I referred to earlier, will play a role in maintaining the brand but, just as important, you need to take care selecting franchisees and monitoring their operations. In addition to checking that franchisees have the relevant skills and experience to run a successful business, you also need to ensure that they share the same business values as you, that they accept the importance of maintaining the brand and that they are clear about what they can or can’t change about the way the business is run – so people who are very individualistic will probably not make good franchisees.
Section 3
The written agreement between the franchisor and franchisee should specify very clearly what performance and quality standards are expected, and much of the initial training will be ensuring that staff have the skills to achieve these standards. However, regular visits to franchise units are essential in ensuring that the standards are being applied consistently and uniformly, and ongoing training may be necessary to deal with issues that are uncovered in these visits. Protecting the brand is ultimately in the interests of both the franchisor and the franchisee because, for the franchisee, one of the main advantages in running a franchise is that they are buying into and helping to consolidate an established brand.
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